Federal Bureau of Investigation Annual Financial Statement
Fiscal Year 2002

Report No. 03-29
August 2003
Office of the Inspector General

This audit report contains the Annual Financial Statement of the Federal Bureau of Investigation (FBI) for the fiscal years ended September 30, 2002 and September 30, 2001. Under the direction of the Office of the Inspector General (OIG), the audit was performed by KPMG LLP and resulted in an unqualified opinion for FY 2002. An unqualified opinion means that the financial statements present fairly, in all material respects, the financial position and the results of its operations. For FY 2001, the FBI also received an unqualified opinion on its financial statements (OIG Report No. 02-36).

The FBI had three material weaknesses, all of which were repeat conditions from the previous fiscal year. Material weaknesses continued in the internal controls over the FBI's information systems, the ability to accurately account for and report on property and equipment, and the timely preparation and submission of financial statement information. The material weaknesses regarding property and information system are long standing, having persisted since the FY 1999 and 1996 audits respectively. Issues on timely financial statement preparation were initially reported in FY 2001.

The OIG is concerned with the persistent nature of the material weaknesses. The FBI must dedicate sufficient resources to correct these deficiencies. Continued weaknesses in controls over information systems could compromise the security and reliability of financial or program data. With the accelerated reporting deadlines imposed by the Department and the Office of Management and Budget, the FBI must improve on its ability to prepare timely financial information and ensure personnel outside the finance office are involved in the process. The FBI should also correct weaknesses in property management.

In their Report on Compliance with Laws and Regulations, the auditors concluded that the FBI's financial management systems did not substantially comply with Federal Financial Management Systems requirements and applicable federal accounting standards as required by the Federal Financial Management Improvement Act of 1996. This noncompliance was also reported for FY 2001.